MCA clarifies on AC and NRC constitution

MCA vide its notification dated July 13, 2017[1] came up with the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 (hereinafter referred to as “MBP Second Amendment Rules, 2017) substituting provisions of rules 3 and 6 of the Companies (Meetings of Board and its Powers) Rules, 2014 (hereinafter referred to as “MBP Rules, 2014). This notification shall come into force from the date of publication in the Official Gazette. Read more

IBC (Removal of Difficulties) Order

Author: Vallari Dubey

The Government on 24th May 2017 released the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017 making additions in the Eighth Schedule of the Code, which originally amends the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (SICA), in order to clarify the matter in view of the repeal of the Sick Industrial Companies (Special Provisions) Act, 1985, substitution of clause (b) of section 4 of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 and omission of sections 253 to 269 of the Companies Act, 2013. We discuss in detail the order brought and its effect.

Provisions before the Order

The Insolvency and Bankruptcy Code, 2016 (“Code”) came into effect from 28th May 2016 amending the relevant provisions of several existing laws in India in order to modify them in line with the new Code. All such modifications were made in form of different schedules forming part of the Code. One such important amendment is that to the provisions of SICA. Whereby, Section 252 allowed the amendment to SICA to smoothly transfer the proceedings as provided in the Eight Schedule from the purview of SICA to the Code. Accordingly, following has been provided in the Eight Schedule:

“In section 4, for sub-clause (b), the following sub-clause shall be substituted, namely—

 ” (b) On such date as may be notified by the Central Government in this behalf, any appeal preferred to the Appellate Authority or any reference made or inquiry pending to or before the Board or any proceeding of whatever nature pending before the Appellate Authority or the Board under the Sick Industrial Companies (Special Provisions) Act,1985 (1 of 1986) shall stand abated:

 Provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make reference to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 within one hundred and eighty days fromthe commencement of the Insolvency and Bankruptcy Code, 2016 in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016: Provided further that no fees shall be payable for making such reference under Insolvency and Bankruptcy Code, 2016 by a company whose appeal or reference or inquiry stands abated under this clause.””

 Additions made by virtue of the Order

The Order has added two more provisos in addition to the existing ones:

“Provided also that any scheme sanctioned under sub-section (4) or any scheme under implementation under sub-section (12) of section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall be deemed to be an approved resolution plan under sub-section (1) of section 31 of the Insolvency and Bankruptcy Code, 2016 and the same shall be dealt with, in accordance with the provisions of Part II of the said Code: 

 Provided also that in case, the statutory period within which an appeal was allowed under the Sick Industrial Companies (Special Provisions) Act, 1985 against an order of the Board had not expired as on the date of notification of this Act, an appeal against any such deemed approved resolution plan may be preferred by any person before National Company Law Appellate Tribunal within ninety days from the date of publication of this order.”

Impact and Analysis

The first proviso that has been added provides for treatment of a scheme sanctioned under Section 18(4) of SICA and for the purpose of monitoring the implementation of that sanctioned scheme under Section 18(2) of SICA. With the immediate effect of this Order, following shall be effective:

  1. All the sanctioned schemes shall be deemed to be an approved resolution plan under Section 31(1) of the Code.
  2. And for the purpose of monitoring and implementation the same shall be dealt with the provisions of the Code set out to deal with approved resolution plans.

The second proviso provides for changes with respect to appeal. Accordingly, the statutory period within which an appeal was allowed under the Sick Industrial Companies (Special Provisions) Act, 1985 against an order of the Board had not expired as on the date of notification of this Act, an appeal against any such deemed approved resolution plan may be preferred by any person before NCLAT within 90 days from the date of publication of this order.

To understand this arrangement, one shall go back to the provisions of time-limit set out in SICA 1985, relevant extract of which is:

  1. Appeal: – (1) Any person aggrieved by an order of the Board made under this Act may, within forty-five days from the date on which a copy of the order is issued to him, prefer an appeal to the Appellate Authority:

Provided that the Appellate Authority may entertain any appeal after the said period of fortyfive days but not after sixty days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time.

 Moreover, the validity of the appeal in the Order is in relation to the date of notification of SICA 2003, which is 25th November 2016.

 The above arrangement is explained in the below mentioned table:

Days to Appeal under SICA 1985 till 1st January Appeal under SICA 1985 Appeal under the Code to NCLAT Time-limit to file appeal with NLAT
Within 45 days Valid Valid Within 90 days of 24th May 2017
Withing 105 days Valid with sufficient cause Valid Within 90 days of 24th May 2017
Beyond 105 days Not valid Not valid N/A

Looking at the intention, it is understandable that a window of 90 days without any further extension has been provided to keep the intention of justice in mind and in the statutory stream, while everything is being transferred to the newly established Insolvency and Bankruptcy Code, 2016.

 

FAQs on impact of GST on financial services, by Financial Services Division, 24th May, 2017

  1. What is the meaning of financial services?

Financial services have no meaning ascribed to it under the GST regime. However, for the purpose of this write up, by financial services, we mean any supply of goods or services by a person to another person, meant for the purpose of extending credit support. This includes, but is not limited to the following: Read more